Digital trends: challenges and prospects for business

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Digital trends: challenges and prospects for business

M. Dorosh-Kizym Associate Professor; R. Grabovskiy Associate Professor, Stepan Gzhytskyi National University of Veterinary Medicine and Biotechnologies Lviv; M. Dorosh, Senior Teacher Lviv University of Business and Law

Анотація

Сучасний світ змінюється блискавичною швидкістю. Те, що було актуально вчора, сьогодні може застаріти. Цифрова трансформація - це природний процес розвитку суспільства та бізнесу. Ця еволюційна стадія особлива - вона усуває бар'єри та глобалізує ринок. Зараз ми спілкуємося, вчимося і змагаємося не один з одним, а з іншими країнами, ринками, спільнотами. Інформація є ключовим ресурсом у сучасному світі.

В епоху цифрової трансформації традиційні офісні компанії замінюються компаніями-платформами; формуються підходи до побудови бізнес-процесів. Мобільні технології, соціальні мережі, хмарні сервіси, інтегровані пристрої, великі дані та різноманітні аналітичні інструменти впливають на потенціал людського капіталу. Компанії використовують цифрові інновації, щоб радикально переглянути роботу та свої конкурентні переваги, підвищити продуктивність, переваги для клієнтів, збільшити прибуток. Багато компаній виступають з інноваційними ініціативами. Проте більшість із них не в змозі здійснити необхідну трансформацію, якої потребує сучасний бізнес.

Цифровізація породила власну економіку - систему, яка стала невід'ємним атрибутом нашої реальності, а також її влади (провідні країни), які вчасно впізнали тенденції та зуміли бути на гребені її хвилі. Ця глобальна тенденція призвела до змін у способі виробництва майже у всіх галузях, які були в його появі, і це відбувається досі.

Глобальна цифровізація передбачає реалізацію заходів щодо запровадження відповідних стимулів для цифровізації економіки, громадської та соціальної сфер, усвідомлення існуючих викликів та інструментів розвитку цифрових інфраструктур, набуття громадянами цифрових компетенцій, а також визначення критичних сфери та проекти цифровізації, стимулювання внутрішнього ринку, використання та споживання цифрових технологій.

Ключові слова: цифровізація, промислова революція, віртуальна реальність, креативна культура, онлайн-бізнес, технології блокчейн, фрілансери, дауншифтери, інтерактивний маркетинг, міленіали, омніканальність, цифровий маркетинг, еміентні медіа, конектори, кібербезпека, soft skills, економіка спільного використання, Інтернет речей, краудсорсинг, цифрова трансформація, ІТ-ринок, цифрове походження, Індустрія-4.0.

Annotation

The modern world is changing at lightning speed. What was relevant yesterday may be outdated today. Digital transformation is a natural process of social and business development. This evolutionary stage is special - it removes barriers and globalizes the market. Now we communicate, learn and compete not with each other but with other countries, markets, communities. Information is a key resource in the modern world.

In the digital transformation era, traditional office companies are being replaced by platform companies; and approaches to building business processes are being formed. Mobile technologies, social networks, cloud services, integrated devices, big data, and various analytical tools affect the potential of human capital assets. Companies use digital innovations to radically review the operation and their competitive advantages, increase productivity customer benefits, increase profits. Many companies come up with innovative initiatives. However, most of them are not able to implement the necessary transformation that modern business needs.

Digitalization has spawned its own economy - a system that has become an indispensable attribute of our reality as well as its authorities (leading countries), who recognized trends in time and managed to be on the crest of its wave. This global trend led to changes in the way of production in almost all industries that were in its appearance, and it still does.

Global digitalization provides for the implementation of measures to introduce appropriate incentives for the digitization of the economy, public and social spheres, awareness of the existing challenges and tools for the development of digital infrastructures, the acquisition of digital competencies by citizens, and also identifies critical spheres and projects of digitization, stimulating the internal market, use and consumption of digital technologies.

Keywords: digitalization, industrial revolution, virtual reality, creative culture, online business, blockchain technologies, freelancers, downshifters, interactive marketing, millennials, omnichannel, digital marketing, ambient media, connectors, cybersecurity, soft skills, sharing economy, Internet of things, crowdsourcing, digitally transformed, IT market, digitally-born, Industry-4.0.

Introduction

At the beginning of the last century, British economist John Keynes determined that demand stimulates supply. However, for the Ukrainian reality, this is not always the case, and especially when it comes to high-tech IT products. The domestic business market, most likely, follows the principles of the «Say's Law» according to which the proposal forms the need for a certain product or service. Actually, this is the situation in which an enterprise can work for years using outdated methods and the dominance of human labor at every stage. And as soon as technologies appear from a competitor, become a condition of a loan or an international grant, the enterprise is «forced» to become innovative.

Undoubtedly, digitalization is a global megatrend. It has been present in the life of every person on earth for more than a year and will last for a long time. On the way to its development, digitalization radically changes many processes and phenomena. Thanks to it, such concepts as startups, business incubators, accelerators, business angels and many others have become firmly established in economics.

In the digital age, the main resource is inexhaustible, accurate, reliable, truthful and timely information. The main platform for the development of the digital economy is a virtual network of the boundless Internet.

Theoretical principles and practical aspects of digitalization have been considered in the works of both domestic and foreign scientists. In particular, scientific studies in the field of electronic systems in business presented by the works of Moushovitz A., Philip A., Frumkin M., Raiss M., Fusho S. E-business from the standpoint of marketing is well covered in the works of Lutte U., Kekhli S., Klain S. The issue of efficiency of business decisions in the context of the logistics chain «business content management» is an integral part of long-term studies by Kendales I., Banerdzhi P., Baumer R. The relevance of this study is reflected in numerous scientific works of Ukrainian authors, in particular Makarova M., Vishnevsky V. [1], Boyko L. [3], Boronos V. [4], Kloba L. [5], Rudenko M. [9], Filipova L., Shaleva O., who in detail covered the key issues of digital economics in their studies.

But, at the same time, there are a number of problems with the vision of the concept digital development, the types of products of the economy and the services that the digital economy produces and provides remain insufficiently disclosed.

The purpose of the article. The aim of the article is to study the basic principles digitalization of Ukraine's economy and study of the main trends of digital transformation of business processes.

Results

Initially, digitalization was understood exclusively as the conversion of analog data into digital formats, but nowadays the term «digitalization» is used in a much broader sense, including as a «digital revolution» in the economy, society and private life [5].

In point of fact, digitalization as such is not a new phenomenon and has been developing since the early 70s. Recently, however, this process has rapidly accelerated, thereby significantly improving the network infrastructure and communications, hardware and software, more and more enabling manufacturers to sell their goods and services around the world. In addition, with the rise in digitized information, the increase in computing power and the wider penetration of high-speed Internet connections, the ability of enterprises to collect, transmit and process information has significantly increased. The movement of information across borders has become an important component as a contribution to the production of goods and services, a key component of new types of data that are intensively used in international markets (fig. 1.).

Figure 1. E-commerce life cycle

Source: Indicators calculated based on data from The Future Of Castomer Engagement And Experience

Be that as it may, but considering recent events, the digital transformation of business has become a vital necessity for representatives of all spheres, forms and scales of entrepreneurship. Those who did not have time to restructure the processes or provided services that are not related to the «figure» - left the market in the first lockdown.

E-commerce in Ukraine is the distribution, sale, advertising, promotion of services and goods, ie any transactions on the worldwide network using digital devices.

There are five main areas of electronic commerce:

- online commerce

- network marketing

- money transfers from e-wallets and cards through online payment systems

- internet banking

- information sites: webinars, coaching, training.

Outdoor advertising has now lost its relevance, but digital marketing tools, on the contrary, are working at full capacity. People spend most of their time at the monitors of computers or laptops, televisions, and mobile devices. During the quarantine period, the advertising budgets of travel companies, businesses selling luxury, premium-segment goods, and companies specializing in entertainment, leisure, event marketing, and catering have significantly decreased.

The main, but not the only, plus of e-commerce is the lack of geographical restrictions. Cooperation with logistics companies helps reach the audience on a global scale. Finding the target audience has become much easier because people like to gather in interest groups on social networks, on thematic forums and sites.

The next plus is the price of the product, which in the online store is often lower than in offline stores. This is due to the reduction of the chain of intermediaries between the supplier and the customer, and the reduction of maintenance costs.

Advantages of e-commerce for the manufacturer:

- the quality of customer service increases;

- business processes become faster, more efficient and simpler;

- much less paperwork;

- productivity increases: the process starts when a request is received from the customer - neither later nor earlier, without unnecessary actions and delays.

Advantages of online trade for the consumer:

- support and availability from anywhere around the clock: you can choose a product, make a purchase and delivery at any time of the day, from anywhere in the world where there is a network connection;

- ability to select and compare products in different stores;

- one can leave a comment or see other people's reviews about the product before making a purchase decision;

- absolutely comprehensive information about a product or service is always available.

Due to the high competition in e-commerce, the entrepreneur is forced to make discounts, hold promotions and contests. Many banks offer cashback when paid by card.

While there are strong pros, there are downsides to digital financial relationships. Here are the main ones:

- great competition in popular areas of online trading;

For example, selling home appliances, video and audio equipment, mobile phones will have to literally fight for every buyer. In this case, you need significant costs for marketing, SMM promotion, SEO site optimization

- little trust in new online stores from the users' side, cybercrime;

This was facilitated by fraudsters who have long paid attention to e-commerce, and each time create new models of deceiving consumers on the Internet. Today, the use of information technology has no boundaries. The virtual space takes everything from the real, including crime in its new forms and manifestations. The concept of cyberspace, introduced by writer William Gibson, describes the virtual space as such, in which the electronic data of all computers in the world circulate.

Cybercrime includes various types of crime committed on a computer and on the Internet. The object of cybercrime is personal data, bank accounts, passwords and other personal information of both individuals and businesses and the public sector. Cybercrime is a threat not only nationally but also globally.

Any Internet user can be the target of cybercrime.

The most common types of such crimes are:

Carding - the use in operations of payment card details obtained from hacked servers of online stores, payment and payment systems, as well as from personal computers.

Phishing is a type of fraud in which customers of payment systems are sent an e-mail, allegedly from the administration or security service of this system, with a request to indicate their accounts and passwords.

Wishing is a type of cybercrime in which messages contain a request to call a specific city number, and during a conversation, confidential data of the cardholder is requested.

Online Fraud - Fake online auctions, online shopping sites, and websites and telecommunications media.

Piracy is the illegal distribution of intellectual property on the Internet.

Malware - Creation and distribution of viruses and malicious software.

Refiling is an illegal substitution of telephone traffic. Today, countering cybercrime and the level of cyber security is one of the priority areas in the country's policy. But, for a comprehensive fight against this problem, joint efforts of the state, citizens and the international community are needed.

- lack of knowledge about networking (fig.2.).

Here are the principles different from offline trading: analytics, logistics, and order processing are different. Delay in responding to customer inquiries can ruin a company's image.

- business success depends on stable high-speed internet and daily involvement of the owner in business management;

- competently developed legal framework;

It is primarily needed to regulate business processes in the network. However, unfortunately, it does not exist. This includes the protection of personal data. The integration of up-to-date software, often expensive, is needed.

- quite often the consumer cannot come and pick up the purchase;

A perfectly established delivery mechanism from the manufacturer directly to the consumer is required.

- responsible remote employees are difficult to find and train.

All these problems of electronic commerce can be solved, but it will be necessary to make considerable efforts. After all, the goal of any business is to get the maximum profit, and the digital platform allows you to do it with minimal investment at the start.

With the growth of the global e-commerce industry, entrepreneurs are seizing the opportunity to enter various foreign markets to attract new customers and expand their business.

Today, e-commerce has not only confidently entered the life of ordinary citizens, but has also become a competitive advantage in international trade for those states that stimulate its development. Ecommerce provides businesses with new opportunities to capitalize on the surge in demand from consumers looking to shop online.

The main trends in the near future for manufacturers should be:

- control of all channels of communication with the consumer by the brand;

- work with the already existing customer base;

- maximum automation of business processes;

- creation of the effect of presence in the offline point at the Internet customer.

The above trends are aimed at creating conditions that will quickly or even automatically close the user's questions and doubts about purchasing goods in an online store (fig. 3.).

It is rather difficult to assess the Ukrainian e-commerce market due to the large number of small players and non-public data on the level of sales of the majority of large players. Nevertheless, according to various studies, it is safe to say that e-commerce has every chance to take up to 80-90% of the share of classic retail. And it will change quite a lot in other areas - logistics, the market of cashless payment systems, advertising business, and the like.

Taking into account global trends, all new e-commerce services are appearing in Ukraine. In particular, in the domestic market a service called «fulfillment» is gaining momentum, which has long been in demand in the world.

Domestic e-commerce shows an annual growth of 35%, which prompts related industries to offer new services for Internet businesses. According to the study by Ukrainian E-commerce Expert, the share of e-commerce in the client portfolio of postal companies is 60-70%. The European E-Commerce Report 2020 shows that the Ukrainian e-commerce market is the most dynamic in Europe [4].

Figure 3. E-commerce market in a multi-channel format

Source: Indicators calculated based on data from Rssquarz Tech Solutions Pvt

A year and a half ago, the Ukrainian market began to talk about a relatively new business service - fulfillment, which gained popularity in the world thanks to the revolutionary solutions in the logistics of Amazon.

There is no single general definition of services. But market participants broadcast fulfillment as a full range of operational and warehouse processing of orders for online stores: receiving goods from suppliers, storage in a warehouse, picking and packing, shipping orders for delivery, delivery by own transport or control of delivery by postal companies, processing returns. So, having outsourced the logistics operations, the online store focuses on promoting its product and sales, and the logistics provider already corresponds to the processing of goods and timely execution of the order.

And, although logistics outsourcing for online stores is not an innovation today, fulfillment as a separate type of business has recently begun to be perceived.

Fulfillment allows e-commerce market players to significantly reduce logistics costs and improve internal processes. Firstly, the online store does not need to invest large resources in warehouse space and staff training. Secondly, the logistics operator is able to process the full volume of orders efficiently and quickly, even during the high season. Thirdly, logistics providers are much better and more efficiently able to return unsold goods to the supplier [8].

The end user also wins because if the logistics processes are built correctly, the delivery time of the online order is significantly reduced.

The world is going digital. And e-commerce is an important part of this transformation. The more developed the country's economy, the larger the volume of the online trading market becomes [9].

E-commerce in our time is a whole industry that is rapidly penetrating all areas of human activity. Right now this industry is in a stage of rapid growth. A huge number of companies around the world see it as a great commercial potential and an opportunity to move their business to a qualitatively new level.

The year 2020 slightly corrected the described strategic vision. The coronavirus pandemic and the introduction of quarantines in many countries have somewhat changed the perspective from which the world looks at the development of digitalization. Many thinkers around the world have argued that digitalization is the future of mankind, and even more so, a way to overcome global problems like COVID- 19. They believe that due to the pandemic, the pace of informatization will increase significantly, and this will lead to a kind of digital leap of humanity, as a result of which the «digital» will penetrate into all spheres of human reality. Coronacrisis has created or amplified a range of human needs, such as food and medicine delivery, video calling or online training. This has created or expanded certain niches in the economy. Capital began to flow there, which wanted to make money on it [1].

In the current conditions, every business should have something like an informatization department. For shops, restaurants and hotels, the Internet version of their business is a «must have». Otherwise, the next quarantine will simply turn them off from the economic cycle and actually put them on the brink of bankruptcy.

By the beginning of the pandemic, virtual and traditional economies lived in separate lives in the world, which did not overlap very much. Now they will probably be forced to grow together in order to create a certain organizational hybrid, which will be much more resilient in the current reality. Businesses that saw certain opportunities in digitalization but did not use them in the absence of an urgent need are now likely to switch to this direction of development.

trade digitalization business e-commerce

Conclusion

Scientists predict that the impact of the coronavirus pandemic will provide a long-term boost to ecommerce. New customers will continue to buy products online because it is convenient, fast and safe (due to non-cash payment and guaranteed money back in case the product does not fit). Analysts say the ecommerce industry will be the largest beneficiary of the coronavirus pandemic.

The coronavirus (COVID-19) pandemic continues to have a significant impact on e-commerce and online consumer behavior around the world. As millions of people stayed at home in early 2020 to contain the spread of the virus, digital channels have become the most popular alternative to crowded stores and personal shopping. In June 2020, global e-commerce retail traffic reached a record 22 billion monthly visits, with exceptionally strong demand for everyday goods such as food, apparel, and retail technical goods.

There has been a so-called «shift in demand» from conventional retail to e-commerce. The COVID- 19 crisis has accelerated the spread of e-commerce with new businesses, customers and product types. It provided customers with access to a wide variety of products from the comfort of their homes and allowed companies to continue operating despite various constraints.

E-commerce transactions in many countries have partially shifted from luxury items and services to everyday necessities that are relevant to a large number of people. Some of these changes in the ecommerce landscape are likely to be long-term in light of the possibility of new epidemic waves, the convenience of new shopping habits, training costs and incentives for companies to benefit from investing in new sales channels. For consumers, systemic issues related to connectivity, affordability, skills, and trust (e.g., digital security, privacy, and consumer protection) have become more acute.

In Ukraine, the e-commerce market occupies 7% of all sales. While in Europe it is 15%, in China - 30%. The country has room to grow. The pandemic has accelerated this process. It can be said that it has become a market driver along with logistics, secure payment systems and mobile. At the same time, the quarantine showed that the business model of the marketplace is more «tenacious» than individual or mono-brand sites.

Globalization and digital transformation of business will definitely divide the world into two camps: leading countries that create values and innovations that determine the future; and ordinary consumer societies entwined in the tail of civilization. It will be almost impossible to jump from the second cluster to the first. It is important not to lag behind right now, to give our society and Ukraine the opportunity to create and inspire, not to consume and imitate.

The good news for us is that the modern world is set up in such a way that even countries that are just embarking on the path of digital transformation have equal chances with those who have been following it for a long time. Bad - if we do not move in this direction faster than others, we will lose.

Perspective directions of further research

The digital economy involves the digital transformation of all spheres of life, giving them a significant economic and social effect. At the same time, it is extremely important to reduce digital inequality. Remote settlements and social facilities should be brought closer to the possibilities of the city. The main task should be to connect at least 95% of Ukrainian households to uninterrupted Internet access.

Every city, should have a modern public Wi-Fi network. Digitalization is primarily about digital amenities. All this opens up powerful new opportunities for the state, society and its citizens.

Digital transformation cannot be done by one unit or one person. All decisions about transformation are made collectively, thoughtfully and gradually, which is often problematic and time consuming. But despite all the difficulties, digital transformation is a process that should be one of the priorities for modern business.

References

1. Vishnevsky V., Harkushenko O., Kniaziev S., Lypnytskyi D., Chekina V. (2020) Digitalization of Ukrainian economy: transformational potential. Monograph. ISBN: 978966-360-398-8, PH «Akademperiodyka», Kyiv. 188 p.

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7. Dorosh-Kizym M.M., Dadak O.O., Gachek T.S. (2018) Lohistychni posluhy yak nevid'yemna skladova elektronnoyi komertsiyi. Scientific Messenger of LNU of Veterinary Medicine and Biotechnologies, Seriya Ekonomichni nauky, 21(91), 51-56.

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